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26th Sep 2022

Juncker 'serene' over Luxembourg tax scandal

  • Jean-Claude Juncker, currently commission president, was finance minister and then prime minister of Luxembourg from 1989 until 2013 (Photo: .michael.newman.)

The EU commission may "broaden and deepen" its investigations into Luxembourg taxation practices, commission spokesman Margaritis Schunas said Thursday (6 November) after the publication of Luxembourg Leaks by several newspapers around the globe.

The Luxembourg Leaks shed light on 343 international companies, including Ikea, Deutsche Bank and Pepsi, who all benefited from secret tax deals with the Grand Duchy in order to pay as little tax as possible on their global profits.

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So far, the EU commission has launched formal investigations into potential illegal state aid given by Luxembourg to two companies - Fiat Finance and Amazon - but the spokesman said the new competition commissioner, Margrethe Vestager, "has all the freedom" to pursue new cases.

Jean-Claude Juncker, currently commission president, was finance minister and then prime minister of Luxembourg from 1989 until 2013, making it very unlikely that he did not know about the scheme.

He all but vanished on Thursday, when he was supposed to attend a public event in Brussels, and let Schinas field the questions for him.

The spokesman refused to answer if his boss had been involved and aware of it, saying all questions should be directed to the current government in Luxembourg. Asked how Juncker took the news Thursday morning, Schinas said he was "serene about it".

He also tried to downplay the revelations by saying this was "normal practice" by national governments who try to attract investments, be it in the banking sector, the cinema or the chemical industry.

"It is the role of the commission to check whether EU law was breached, there is no tolerance, no double standards," he said.

'Untenable situation'

Meanwhile, Luxembourg finance minister Pierre Gramegna, in Brussels for a Eurogroup meeting, told journalists that the tax rulings were "fully in line with Luxembourg, EU and international law", but he admitted that it led to tax avoidance by big corporations.

"What is legal today, may not be ethically desirable or it may be incompatible with the norms we would like to be in place. This is an untenable situation for us and our citizens in Europe, who have to pay taxes while some companies pay so little," Gramegna said.

He also vowed to "fully cooperate" with the EU commission on "specific cases", but he said the EU executive had made an "excessive" request when it asked for all tax rulings to be sent to Brussels.

As for Juncker, the minister said there was no need to "finger-point" at anyone, since the practices had been legal. He did acknowledge, however, that there was need for more staff to deal with these tax rulings and said he appointed "a whole team" for this topic.

The Wall Street Journal last month interviewed the one official, Marius Kohl, who was responsible for most of these rulings, who said Juncker never complained about any of his decisions.

Parliament demands answers

The Socialist and the Liberal groups in the European Parliament have called on Juncker to explain himself in the EP next week, a decision which still has to be confirmed by the EP president.

Unlike his own political group, which said "Juncker's credibility is on the line," Schulz struck a careful tone in his reaction to the scandal.

"I have taken note of the reports and I am confident that the European Commission will check the cases with regard to potential breaches of EU law and will take all appropriate actions swiftly and if necessary," Schulz said in a press release.

"What worries me most is the fact that the reported practices were manifestly legally possible in some countries. This reality means that we need to urge the member states to work with us to end systematic tax evasion practices in Europe, be it in Luxemburg or any other country," he added.

As for Juncker's political family, the European People's Party, it said it "fully trusts and fully supports the European Commission in the ongoing investigation on schemes in Luxembourg and other member states."

But they said this was "not a personal issue" for Juncker, rather a matter between the EU commission and the government in Luxembourg.

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